OIL FUTURES: Crude prices fall as market digests underwhelming Chinese stimulus

Crude oil futures fell in midmorning trading in Asia on Nov. 11, as the market continued to digest the lackluster Chinese stimulus package released late Nov. 8, which failed to boost optimism in the sluggish economy of the world's largest crude importer.

At 11.04 am Singapore time (0304 GMT), the ICE January Brent futures contract fell 18 cents/b (0.24%) from the previous close to $73.69/b, while the NYMEX December light sweet crude contract was down 22 cents/b (0.31%) at $70.16/b.

The National People's Congress (NPC) unveiled its much-anticipated fiscal stimulus package totaling Yuan 10 trillion, which the market had initially hoped would lift China's struggling economy.

However, the stimulus package failed to alleviate concerns over an economic recovery.

"But instead of delivering fireworks, the plan ended up being more of a fizzle. While the number is massive -- around 8% of GDP [gross domestic product] -- the focus is primarily on debt relief for local governments, stabilizing infrastructure projects and shoring up local government financing vehicles. It is not exactly the growth rocket many had hoped for," SPI Asset Management Managing Partner Stephen Innes said Nov. 11.

Further adding to concerns over China's economic resilience, both the October consumer price index and producer price index reflected persistent weaknesses within the economy.

"Producer prices in October slumped 2.9% year over year, a deeper decline than the 2.8% fall in September, marking the biggest drop in 11 months. Consumer price inflation also slowed to 0.3%, the slowest pace in four months, suggesting that China's path to economic reflation will likely be at a snail's pace," Innes said.

Adding to market apprehension, President-elect Donald Trump's proposed tariffs are expected to further strain China's economy.

"Investors also remained concerned around the impacts of Trump's promised tariffs on China's economic growth, which may crimp oil demand. Even the purchase of 2.4 mbbl of oil by the Biden administration for the Strategic Petroleum Reserve went unnoticed," Brian Martin and Daniel Hynes, research analysts at ANZ, said in a note drafted Nov. 11.

Hurricane Rafael hampers US crude output

Meanwhile, oil and natural gas production losses in the US Gulf of Mexico rose to around 23% for oil and 11% for gas as operators quietly prepared for Hurricane Rafael potentially strengthening into a Category 3 storm, according to a Nov. 8 update from the Bureau of Safety and Environmental Enforcement, with 15 companies included in the BSEE's latest status report.

In total, 23.4% of oil production, equivalent to around 408,830 b/d, was shut in, while 10.8% of gas production, amounting to about 201,000 Bcf/d, was also halted.

"US oil production hit a record high of 13.5 mb/d for the week ending Nov. 1, while Hurricane Rafael impacted nearly 1.1 mb/d of production since Nov. 6. Chevron has shuttered its production facility in the Gulf of Mexico," Hynes and Martin said.

As a result, any downturns in the crude complex are expected to be limited, as concerns over the potential damage from Hurricane Rafael are likely to provide support to market fundamentals.

Dubai swaps

Dubai crude swaps and intermonth spreads were lower in midmorning trading in Asia on Nov. 11 from the previous close.

The January Dubai swap was pegged at $72.09/b at 11 am Singapore time (0300 GMT), down $1.12/b (1.53%) from the Nov. 8 Asian market close.

The December-January Dubai swap intermonth spread narrowed 12 cents/b to 31 cents/b at 10 am over the same period, and the January-February intermonth spread was pegged at 25 cents/b, narrowing 3 cents/b.

The January Brent/Dubai exchange of futures for swaps was pegged at $1.58/b, down 8 cents/b from the previous Asian close.